Military tax law is a maze of exclusions, deferrals, and state-by-state carve-outs that don't exist in the civilian tax code. Base pay is taxable — but hazardous-duty pay in a combat zone is not. BAH and BAS are not taxable federally — but a handful of states include them. VA disability compensation is fully tax-free. Military retirement pay is fully taxable at the federal level — but exempt in about half of states.
This hub is the entry point to Rank and Pay's active-duty and retiree tax coverage. Use it to navigate to the specific spoke you need — most tax questions are answered on one of the linked pages below.
The active-duty pay tax picture
- Base pay: Fully taxable at federal level. State treatment depends on your state of legal residence (SCRA + MSRRA).
- BAH (housing allowance): Federally tax-free under IRC § 134. Most states honor federal treatment; a few use it as imputed income for state tax. See Is BAH taxable?
- BAS (subsistence allowance): Federally tax-free.
- Combat Zone pay: Fully excludable up to enlisted level; officer exclusion capped at highest enlisted plus imminent-danger pay. See Combat Zone Tax Exclusion (CZTE).
- VA disability compensation: Fully tax-free under 38 U.S.C. § 5301(a). See Is VA disability tax-free?
- Military retirement pay: Fully taxable federally; taxable status varies enormously by state. See our Military Retirement Taxes guide for the full state comparison.
State income tax and residency
Two federal laws govern where a military family's state income tax is owed:
- SCRA (Servicemembers Civil Relief Act) — the service member keeps their state of legal residence indefinitely, regardless of duty-station PCSes.
- MSRRA/VBTA — the civilian spouse can elect the service member's state of legal residence for state income tax, voting, and vehicle registration. See MSRRA guide.
All spokes in this hub
- Combat Zone Tax Exclusion — statutory basis, qualifying zones, officer cap, TSP interaction.
- Is BAH taxable? — the clear federal answer + state exceptions + mortgage gross-up.
- Is VA disability tax-free? — federal + state treatment, retiree pay offset.
- SBP vs life insurance: tax treatment — the taxable-vs-tax-free split.
- Do military members pay taxes? — the head-question walkthrough for what's taxable and what's not.
Free tools worth knowing
- MilTax (Military OneSource) — free federal + state return preparation, no income cap for active-duty and recently-separated members. Uses H&R Block's engine but scoped for military filers.
- VITA (Volunteer Income Tax Assistance) — free preparation at most installations during tax season.
Related tools
Military Pay Calculator · BAH Calculator · CRSC vs CRDP Calculator